Chesapeake's New CEO 'Encouraged' About Utica
YOUNGSTOWN, Ohio -- Oil and gas production in eastern Ohio's Utica shale increased 48% during the second quarter of 2013 compared to the first quarter of the year, Chesapeake Energy Corp. executives said during a conference call Thursday to discuss financial results for the period.
The Oklahoma City-based energy company reported that net production from its 106 active wells in the Utica averaged approximately 85 million cubic feet of natural gas equivalent per day during the quarter ending June 30.
"I'm really encouraged about what I've seen in the Utica," said Doug Lawler, who just six weeks ago took over as Chesapeake's CEO. "We've got a lot of wells we're getting ready to bring on line and I think we have a ton of options available to us."
Lawler noted that well performance is still being evaluated in this relatively young play, and that would determine the level of future investment there.
"We see the Utica as a very strong asset going forward," he said. "I'm very encouraged by it, and from my experience in all the other shale plays, I think it's an exciting area for the company."
Chesapeake operates 11 rigs exploring the Utica, a rock formation deep below eastern Ohio that holds vast reserves of natural gas and natural gas liquids. The company said it plans to reduce the number to 10 by the end of the year.
The company was an early investor in the region and today holds the largest position in the Utica with about one million acres under lease.
Forty-two new Utica wells started production during the second quarter, the company said. The average peak daily production rate of these wells was about 6.6 million cubic feet equivalent per day.
Spud-to-spud cycle time, that is, the period between when the well bore is drilled to completion, was 18 days, down from 26 days a year ago. As of June 30, Chesapeake has drilled 321 wells in the Utica shale play, which includes 106 producing wells, 93 additional wells awaiting pipeline construction and another 122 wells in various stages of production.
A critical component to Chesapeake's production is the completion of the Utica East Ohio Midstream project, a $900 million processing and gas gathering network that stretches from southern Columbiana County to Harrison County.
Utica Ohio is a partnership between M3 Midstream, Access Midstream and EV Energy Partners. Chesapeake is a customer, and will send gas through the network to be processed and sold.
"We're very pleased with the results and anxious to get more of it on this year as we get compression and processing in place," said Chesapeake Chief Operating Officer Steve Dixon. "It's still early, until we get a bigger well set on, which should happen in the second half of this year. So, more to come."
This week, the first phase of UEO's Kensington cryogenic plant in Columbiana County initiated its first sales. The plant gathers gas from nearby producing wells and separates dry gas from liquids by chilling it to about 150 degrees below zero.
The liquid gas is transported to a fractionation plant in Harrison County, where it's processed into products such as butane, ethane and propane.
Chesapeake reported net income of $457 million during the quarter, or 66 cents per diluted share.
Adjusted earnings for the quarter stood at $0.51 per share, compared to 6 cents during the second quarter of 2012.
Operating cash flow was $1.370 billion, a 53% increase year over year.
Revenue for the company was up 38% because of higher natural gas prices and oil production. Chesapeake projected it would increase oil production by one million barrels to between 38 and 40 million barrels this year.
"Oil production was the primary driver of growth this quarter," Lawler said. Much of that production lay in the Eagle Ford shale in Texas.
"Chesapeake reported a strong quarter operationally and financially," Lawler said. "I am very excited and energized by what I have seen during my first six weeks with the company. Chesapeake has an exceptionally broad and deep asset base, which offers tremendous opportunity for value creation."
shareholders of record Aug. 12.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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